DISCO Announces Third Quarter 2025 Financial Results
AUSTIN, Texas--( BUSINESS WIRE)--CS Disco, Inc. (“DISCO”) (NYSE: LAW) today announced financial results for its third quarter ended September 30, 2025.
"Our strategy to bring large clients and large matters to DISCO continued to gain traction in the third quarter with meaningful acceleration in both software and total revenue," said Eric Friedrichsen, CEO of DISCO. "The growing number of large matters on our platform and growing adoption of our advanced GenAI tools demonstrate a very healthy ecosystem as we look to exit 2025 in a strong position for future growth."
Third Quarter 2025 Financial Highlights:
Recent Business Highlights:
Fourth Quarter and Full Year 2025 Financial Outlook
As of November 5, 2025, DISCO is issuing the following outlook for the fourth quarter of 2025 and fiscal year 2025:
Fourth quarter of 2025:
Fiscal year 2025:
DISCO’s fourth quarter and fiscal year 2025 financial outlook is based on assumptions that are subject to change, many of which are outside of its control. If actual results vary from these assumptions, these expectations may change. There can be no assurance that DISCO will achieve these results.
A reconciliation of Adjusted EBITDA on a forward-looking basis to net loss, the most directly comparable GAAP measure, is not available without unreasonable efforts due to the high variability and complexity and low visibility with respect to the charges excluded from this non-GAAP measure; in particular, the effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in DISCO’s stock price and expenses associated with the stockholder litigation. DISCO expects the variability of the above charges to have a significant, and potentially unpredictable, impact on its future GAAP financial results.
Conference Call Information
DISCO will host a conference call and webcast at 4:00 p.m. CT (5:00 p.m. ET) today, November 5, 2025, to discuss its third quarter financial results and business highlights. The conference call can be accessed by dialing (888) 300-4030 from the United States or +1 (646) 970-1443 internationally with conference ID 8394292. The live webcast of the conference call and other materials related to DISCO’s financial performance can be accessed from DISCO’s investor relations website at ir.csdisco.com.
Following the completion of the call until 10:59 p.m. CT (11:59 p.m. ET) on Wednesday, November 26, 2025, a telephone replay will be available by dialing (800) 770-2030 from the United States, or +1 (609) 800-9909 internationally with conference ID 8394292. A webcast replay will also be available at ir.csdisco.com for 12 months.
About DISCO
DISCO (NYSE: LAW) provides comprehensive, innovative solutions for modern litigation. We create and service an intuitive, cloud-native platform at the forefront of litigation technology, backed by the partnership of expert professional services and support. Leveraging the latest in AI to help law firms and corporations achieve smarter outcomes faster, our scalable products and tools allow customers to simplify everyday tasks and tackle complex matters at every stage of litigation.
References to “DISCO,” the “Company,” “our” or “we” in this press release refer to CS Disco, Inc. and its subsidiaries on a consolidated basis.
Use of Non-GAAP Financial Measures
DISCO uses the following non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDA margin; non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP gross margin; non-GAAP research and development expense; non-GAAP research and development expense as a percentage of revenue; non-GAAP sales and marketing expense; non-GAAP sales and marketing expense as a percentage of revenue; non-GAAP general and administrative expense; non-GAAP general and administrative expense as a percentage of revenue; non-GAAP loss from operations; non-GAAP operating margin; non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue. Management believes that these non-GAAP financial measures are useful measures of operating performance because they exclude items that DISCO does not consider indicative of its core performance.
In the case of Adjusted EBITDA and Adjusted EBITDA margin, DISCO adjusts net loss for such items as depreciation and amortization expense; income tax provision; interest and other, net; stock-based compensation expense; payroll tax expense on employee stock transactions; expenses associated with stockholder litigation; and other one-time, non-recurring items, when applicable. In the case of non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP research and development expense as a percentage of revenue, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, and other one-time, non-recurring items, when applicable. In the case of non-GAAP general and administrative expense, non-GAAP general and administrative expense as a percentage of revenue, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders, non-GAAP net loss attributable to common stockholders per share (basic and diluted) and non-GAAP net loss attributable to common stockholders as a percentage of revenue, DISCO adjusts the respective GAAP balances for stock-based compensation expense, expenses associated with stockholder litigation, and other one-time, non-recurring items, when applicable.
There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating loss and net loss. As a result, these non-GAAP financial measures have limitations and should be considered in addition to, not as a substitute for or superior to, the closest GAAP measures, or other financial measures prepared in accordance with GAAP.
DISCO's management uses these non-GAAP measures as measures of operating performance; to prepare DISCO's annual operating budget; to allocate resources to enhance the financial performance of DISCO's business; to evaluate the effectiveness of DISCO's business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of DISCO's results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with DISCO’s board of directors concerning financial performance.
Forward-Looking Statements
This press release contains forward-looking statements, including, among other things, statements regarding DISCO’s future financial performance and DISCO’s strategies and business initiatives. Words such as “may,” “should,” “will,” “believe,” “expect,” “anticipate,” “target,” “project,” and similar phrases that denote future expectation or intent regarding DISCO’s financial results, operations, and other matters are intended to identify forward-looking statements. You should not rely upon forward-looking statements as predictions of future events.
The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors that may cause DISCO’s actual results, performance, or achievements to differ materially, including (i) our history of operating losses; (ii) our limited operating history; (iii) our ability to maintain and advance our innovation and brand; (iv) our ability to effectively add new customers; (v) our ability to effectively increase usage and penetration with our existing customer base; (vi) our ability to expand our sales coverage and establish a digital sales channel; (vii) our ability to expand internationally; (viii) our ability to grow our partner ecosystem and maintain existing strategic relationships with law firms, legal services providers and our other partners; (ix) our ability to expand our offering portfolio to a wider range of legal processes outside of our current core offerings; (x) our dependence on revenue from customer usage, which fluctuates based on the timing of and activity driven by legal matters for which our product offerings are used, and any shortfall of large matters on our platform; (xi) our ability to pursue strategic acquisitions and strategic investments to expand the functionality and value of our product offerings; (xii) our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the jurisdictions in which we operate; (xiii) the potential that our computer or electronic systems, applications or services, or those of any third parties on whom we depend, fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data; (xiv) our ability to compete effectively with existing competitors and new market entrants; (xv) the impact of general macroeconomic conditions, such as fluctuations in inflation and interest rates and the imposition of tariffs in the United States and abroad, on our or our customers’ businesses; (xvi) the impact of unfavorable conditions in the legal industry, including as a result of decreased levels of regulatory enforcement and the current or future shutdowns of the U.S. government, on the growth of our business and usage of our product offerings; and (xvii) the impact that global events, such as the Russia-Ukraine war and conflict in the Middle East, and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations.
The forward-looking statements contained in this press release are also subject to additional risks, uncertainties, and factors, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”), including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, filed with the SEC on August 6, 2025. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that we make with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2025.
Forward-looking statements represent DISCO’s management’s beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.
CS DISCO, INC.
Condensed Consolidated Balance Sheets
(in thousands, except par value amounts)
(unaudited)
September 30,
2025
December 31,
2024
Assets
Current assets:
Cash and cash equivalents
$
28,804
$
52,771
Short-term investments
84,682
76,356
Accounts receivable, net
24,233
23,117
Insurance recovery receivable related to legal loss contingency
9,240
—
Prepaid expenses and other current assets
6,103
4,692
Total current assets
153,062
156,936
Property and equipment, net
8,030
7,878
Operating lease right-of-use assets
6,700
8,388
Other intangible assets, net
251
400
Goodwill
5,898
5,898
Other assets
820
820
Total assets
$
174,761
$
180,320
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
3,464
$
3,994
Accrued expenses
5,189
5,947
Accrued legal loss contingency
15,500
—
Accrued salary and benefits
7,955
9,127
Deferred revenue
4,272
4,296
Operating leases
2,569
2,288
Finance leases
43
42
Total current liabilities
38,992
25,694
Operating leases, non-current
4,908
6,855
Finance leases, non-current
83
116
Other liabilities
148
141
Total liabilities
44,131
32,806
Commitments and contingencies
Stockholders’ equity
Preferred stock $0.005 par value, 100,000 shares authorized and no shares issued and outstanding as of September 30, 2025 and December 31, 2024
—
—
Common stock $0.005 par value, 1,000,000 shares authorized as of September 30, 2025 and December 31, 2024; 62,493 and 60,329 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively
313
302
Additional paid-in capital
463,607
444,601
Accumulated other comprehensive income
10
41
Accumulated deficit
(333,300
)
(297,430
)
Total stockholders’ equity
130,630
147,514
Total liabilities and stockholders’ equity
$
174,761
$
180,320
CS DISCO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Revenue
$
40,919
$
36,266
$
115,678
$
107,842
Cost of revenue
10,008
9,740
29,194
27,880
Gross profit
30,911
26,526
86,484
79,962
Operating expenses:
Research and development
13,420
12,757
41,645
37,724
Sales and marketing
15,032
14,988
44,800
46,294
General and administrative
16,921
9,658
38,921
31,537
Total operating expenses
45,373
37,403
125,366
115,555
Loss from operations
(14,462
)
(10,877
)
(38,882
)
(35,593
)
Interest and other income, net
937
1,837
3,499
5,328
Loss from operations before income taxes
(13,525
)
(9,040
)
(35,383
)
(30,265
)
Income tax provision
(140
)
(118
)
(487
)
(309
)
Net loss attributable to common stockholders
$
(13,665
)
$
(9,158
)
$
(35,870
)
$
(30,574
)
Unrealized gain (loss) on investments
18
61
(31
)
61
Comprehensive loss
$
(13,647
)
$
(9,097
)
$
(35,901
)
$
(30,513
)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.22
)
$
(0.15
)
$
(0.58
)
$
(0.51
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
62,094
59,675
61,320
60,236
CS DISCO, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2025
2024
Cash flow from operating activities:
Net loss
$
(35,870
)
$
(30,574
)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization
2,731
3,092
Stock-based compensation
18,447
16,878
Charge to allowance for credit losses
1,674
2,059
Gain on disposal of long-lived assets
—
(3
)
Non-cash operating lease costs
1,688
1,284
Amortization of premium on short-term investments
(2,568
)
(256
)
Other
93
9
Changes in operating assets and liabilities:
Accounts receivable
(2,790
)
946
Insurance recovery receivable related to legal loss contingency
(9,240
)
—
Prepaid expenses and other current assets
(1,413
)
(523
)
Other long-term assets
—
14
Accounts payable
(633
)
(1,432
)
Accrued expenses and other
(1,488
)
355
Accrued legal loss contingency
15,500
—
Deferred revenue
(24
)
(1,243
)
Operating lease liabilities
(1,666
)
(1,323
)
Other liabilities
(139
)
(120
)
Net cash used in operating activities
(15,698
)
(10,837
)
Cash flow from investing activities:
Purchases of property, equipment and capitalized software development costs
(2,546
)
(2,223
)
Purchases of short-term investments
(155,427
)
(49,937
)
Maturities of short-term investments
149,639
—
Proceeds from disposal of equipment
6
3
Net cash used in investing activities
(8,328
)
(52,157
)
Cash flow from financing activities:
Proceeds from exercise of stock options
36
30
Net proceeds from issuance of common stock under Employee Stock Purchase Plan
421
601
Repurchase of common stock related to net share settlement
(70
)
(100
)
Repurchase of common stock related to share repurchase program
—
(20,052
)
Cash paid for acquisitions
(296
)
(457
)
Principal payments on finance lease obligations
(32
)
(30
)
Net cash provided by (used in) financing activities
59
(20,008
)
Net decrease in cash and cash equivalents:
(23,967
)
(83,002
)
Cash and cash equivalents at beginning of period
52,771
159,551
Cash and cash equivalents at end of period
$
28,804
$
76,549
CS DISCO, INC.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2025
2024
Supplemental disclosure:
Cash paid for taxes
$
1,057
$
572
Non-cash investing and financing activities:
Property and equipment included in accounts payable and accrued liabilities
$
72
$
66
CS DISCO, INC.
Reconciliation from GAAP to Non-GAAP Results
(in thousands, except for percentages and per share amounts)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Net loss
$
(13,665
)
$
(9,158
)
$
(35,870
)
$
(30,574
)
Depreciation and amortization expense
902
989
2,731
3,092
Income tax provision
140
118
487
309
Interest and other, net
(937
)
(1,837
)
(3,499
)
(5,328
)
Stock-based compensation expense
6,090
5,147
18,447
16,878
Payroll tax expense on employee stock transactions
150
95
461
466
Expenses associated with stockholder litigation
7,023
143
9,169
726
Adjusted EBITDA
$
(297
)
$
(4,503
)
$
(8,074
)
$
(14,431
)
Adjusted EBITDA margin
(1
)%
(12
)%
(7
)%
(13
)%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Cost of revenue
$
10,008
$
9,740
$
29,194
$
27,880
Non-GAAP adjustments:
Stock-based compensation expense
(561
)
(456
)
(1,622
)
(1,273
)
Non-GAAP cost of revenue
$
9,447
$
9,284
$
27,572
$
26,607
Non-GAAP gross profit
$
31,472
$
26,982
$
88,106
$
81,235
Non-GAAP gross margin
77
%
74
%
76
%
75
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Research and development
$
13,420
$
12,757
$
41,645
$
37,724
Non-GAAP adjustments:
Stock-based compensation expense
(1,959
)
(1,680
)
(6,246
)
(5,856
)
Non-GAAP research and development
$
11,461
$
11,077
$
35,399
$
31,868
Non-GAAP research and development as a % of revenue
28
%
31
%
31
%
30
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Sales and marketing
$
15,032
$
14,988
$
44,800
$
46,294
Non-GAAP adjustments:
Stock-based compensation expense
(1,420
)
(1,213
)
(4,242
)
(3,464
)
Non-GAAP sales and marketing
$
13,612
$
13,775
$
40,558
$
42,830
Non-GAAP sales and marketing as a % of revenue
33
%
38
%
35
%
40
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
General and administrative
$
16,921
$
9,658
$
38,921
$
31,537
Non-GAAP adjustments:
Stock-based compensation expense
(2,150
)
(1,798
)
(6,337
)
(6,285
)
Expenses associated with stockholder litigation
(7,023
)
(143
)
(9,169
)
(726
)
Non-GAAP general and administrative
$
7,748
$
7,717
$
23,415
$
24,526
Non-GAAP general and administrative as a % of revenue
19
%
21
%
20
%
23
%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Loss from operations
$
(14,462
)
$
(10,877
)
$
(38,882
)
$
(35,593
)
Operating margin
(35
)%
(30
)%
(34
)%
(33
)%
Non-GAAP adjustments:
Stock-based compensation expense
6,090
5,147
18,447
16,878
Expenses associated with stockholder litigation
7,023
143
9,169
726
Non-GAAP loss from operations
$
(1,349
)
$
(5,587
)
$
(11,266
)
$
(17,989
)
Non-GAAP operating margin
(3
)%
(15
)%
(10
)%
(17
)%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Net loss attributable to common stockholders
$
(13,665
)
$
(9,158
)
$
(35,870
)
$
(30,574
)
Non-GAAP adjustments:
Stock-based compensation expense
6,090
5,147
18,447
16,878
Expenses associated with stockholder litigation
7,023
143
9,169
726
Non-GAAP net loss attributable to common stockholders
$
(552
)
$
(3,868
)
$
(8,254
)
$
(12,970
)
Non-GAAP net loss attributable to common stockholders per share, basic and diluted
$
(0.01
)
$
(0.06
)
$
(0.13
)
$
(0.22
)
Weighted average shares used to compute basic and diluted net loss per share
62,094
59,675
61,320
60,236
Non-GAAP net loss attributable to common stockholders as a % of revenue
(1
)%
(11
)%
(7
)%
(12
)%